Gridlocked. Dysfunctional. Polarized.
U.S. Congress? No, South Carolina as it tries to deal with the collapse of the V.C. Summer nuclear construction project.
The South Carolina government’s attempt to figure out how to recover from the multi-billion-dollar collapse of SCANA’s Corp.’s V.C. Summer two-unit new nuclear plant is a mess. In the latest development – and there will be more – the Republican-controlled legislature has overwhelmingly overridden a veto by Republican Gov. Henry McMaster and imposed a temporary 15% rate cut for Scana’s SCE&G subsidiary. The measure would take a $37 million bite out of SCANA’s revenue for the rest of the year, about $22/ month for the typical SCE&G customer, according to the Charleston Post and Courier. After that? Who knows.
McMaster, who recently won Republican renomination for the state house, virtually assuring him another term as governor in deep red South Carolina, late last week vetoed a 15% rate reduction bill. He wanted a permanent 18% rate cut for the failed $9 billion project, the full impact of the rate hikes the investor-owned utility, the major partner in the project, is billing its customers under South Carolina’s pro-utility cost recovery law.
Once McMaster delivered his veto message, the South Carolina house overrode it by a 110-1 vote and the Senate quickly followed by a 39-0 override. The House had originally supported McMaster’s 18% solution, but compromised with the state Senate on the temporary measure. The bill the legislature passed will keep the rat cut in effect until the state’s Public Service Commission’s December meeting.
The Greenville State newspaper commented, “The bill’s passage sent shock waves through South Carolina’s business and legal communities. It could prompt a lawsuit from SCG&E, which raised its rates nine times over the past decade to finance a massive nuclear reactor project that collapsed last July.” The utility says it views the law as unconstitutional.
The new law could also jeopardize the offer by Virginia-based Dominion Energy to buy SCANA for $14 billion. Dominion has said its bid is contingent on keep the Summer cost recovery charges in place. But the Virginia utility holding company hedged its comments after the legislature voted the new plan into law, saying the legislative action was “risking” the takeover offer.
SCANA Corp. stock took a 1% hit after the legislature acted, dropping from $39/share on the June 29 opening to $38/share at the end of the day. At the same time, the company announced it would cut its quarterly dividend by 80% to $17.6 million from $87 million. The Post and Courier reported that it is “SCANA’s first dividend cut in nearly 20 years, highlighting the financial maelstrom hovering over the company” in the year since it killed the new nuclear plant.
The utility promptly filed a federal suit against the new state law in U.S. District Court for the District of South Carolina, charging that the law is unconstitutional and asking the court to “issue an injunction prohibiting the [South Carolina Public Service Commission] from implementing the new law.” The company claims that law is “an unlawful taking of private property” and denies the company “due process of law,” and constitutes “an unlawful bill of attainder.”
The Post and Courier reported earlier in June that the bill for the V.C. Summer failure “could increase by $421 million after a state audit found that the two utilities behind it owe sales tax on the material they bought for the unfinished plant.” The newspaper reported, based on documents it obtained, that the audit shows that SCANA and its 45% partner, state-owned Santee Cooper, face a state claim of $410 million for unpaid back taxes, “which includes millions of dollars of interest tacked onto” the claim. “The assessment covers every item that South Caroline Electric & Gas and Santee Cooper bought for the massive construction project – every bolt, pipe and turbine.”
The two utilities have said they will challenge the audit, which could add some $400 million to the $9 billion the two utilities have blown on the project. South Carolina law exempts major manufacturers from paying sales tax for building materials. But the state Department of Revenue ruled that because the utilities shut down the project, they were not entitled to the exemption.
Santee Cooper last week petitioned the South Carolina Supreme Court to rule that state law requires the public power agency to charge rates “sufficient to pay its debt service and expenses.” Moody’s Investors Service said, “If, as we expect, South Carolina’s highest court affirms Santee Cooper’s board has the authority to maintain and collect rates and charges sufficient enough to pay its debt services and expenses, it would be credit positive.”
Central Electric Power Cooperative, Santee Cooper’s largest wholesale customer, has argued in court that the power agency’s rates are not just and reasonable. Central has 20 days to respond to Santee Cooper’s filing.
— Kennedy Maize